Cargo Insurance Gaps

Have you checked your cargo coverage lately? If you’re like the majority, you advise your agent of the limit you need at renewal and forget about it for the remainder of the year unless you have the misfortune of having a claim. In most cases the cargo claim is handled without any problem, however, in some cases the claims don’t go as smoothly as planned.

As they say, the devil is in the details, and in the case of cargo coverage the details are in the coverage form, the definitions and the exclusions.

Here are some lessons learned the hard way:

The first devil is the coverage form. There are two basic forms of coverage loosely defined as Broad Form & Specified Perils. Broad Form, as its name suggests, pays for any loss to the cargo unless the loss is excluded or limited by the policy. Specified Perils is a more limited form of coverage since it specifically lists the types of losses that are covered by the policy. Lesson #1, Broader is Better.

A second devil is in the definition of cargo. In most cargo forms, cargo is defined as: goods and merchandise of others in your care, custody or control for which you are legally liable under tariff documents, bills of lading or shipping receipts. The definition specifically refers to the shipping documents as a requirement of the cargo coverage. If you, as a trucker, do not make out a bill of lading or shipping receipt since the shipper does not require them, according to the insurance contract the claim can be denied. Lesson #2, make out a bill of lading for EVERY load.

A third devil is in the exclusions. Every insurance contract has its own coverage exclusions so we can’t list everything that may be specific to your policy, but the more common exclusions exclude coverage from losses caused by: delay in delivery, loss of use or market, dishonesty or criminal act of an employee, war/military action, mysterious disappearance or shortage. Lesson #3, Know your Exclusions.

Another devil, which probably falls under the fine-print category, is the co-insurance penalty.Briefly defined, if the cargo limit carried does not equal 100% of the value of the load, the loss payment made by the insurance company is only a percentage of the total loss. For example, if your cargo limit on the policy is $50,000 and the value of the load is $100,000, you are carrying 50% of the required limit and consequently only 50% of the loss would be paid by the company. Not every insurance company enforces this penalty, but it highlights the importance of knowing the value of your load, Lesson #4.

At Colonial Insurance we ask questions, evaluate your needs, and read contracts. We will do our best to provide the best coverages for you at the best rates. We need your help in knowing exactly what you are hauling, how you are hauling it and under what contracts. The lowest premium doesn’t always provide the best coverages; please read your policies. We are here to help you decide which policy is best for you.

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